Will vs Trust: Understanding the Difference
Wills and Trusts are legal documents that are useful tools to assist in your estate planning efforts. These documents can provide the means to guide the distribution of your assets and belongings during your lifetime, at incapacity or death. Preparing a well thought out plan can ensure your assets are distributed according to your wishes and provide peace of mind for you and your family.
A Will is a legal document that directs who will receive your property at your death and it appoints a legal representative to carry out your wishes. The general process of estate administration at your death is known as Probate. This means a court oversees the administration of the Will and appoints an Executor to manage and ensure assets are distributed according to the decedent’s wishes as directed in the Will.
A Trust is a legal document whereby a fiduciary is named as trustee, which can be an individual or a corporation such as a bank. The trustee holds legal title to property for another person, called a “beneficiary.” A Trust typically has two types of beneficiaries — one that receives income from the trust during their lifetime and another that receives whatever is left over (the residue) after the primary beneficiaries pass away. Trust administration of assets pass outside of Probate; therefore, a court does not oversee the process, and the terms can remain private, unlike a Will, which becomes part of the public record.
A Will goes into effect at death and covers any property that is only in your name when you die. It does not cover property held in joint tenancy or in a Trust. A Trust, on the other hand, can take effect as soon as you create it, but in order for property to be included in a Trust, it must be transferred into the name of the Trust. Trusts can also be used to plan for disability during lifetime and are very useful to simplify the transfer of property owned at death, especially real estate that is located outside of your state of residence.
Both a Will and Trust have costs associated with them and can equally utilize strategies for estate and income tax planning. Whether you choose a Will or a Trust, you should seek professionals to help establish solutions best for you. Feel free to contact us to schedule an appointment regarding your estate planning needs.